“This is the most important thing to remember. Enlarging a budget deficit is an especially distortionary and dangerous form of taxation.” “… We all do have to live within the law s of arithmetic. When the government finances its activities by selling bonds, it does have to pay the interest and principal on those bonds.” “…That means that decisions today to increase the budget deficit is not an alternative fiscal policy. It is a commitment to tax increases and spending cuts in the future.”

~Lawrence Summers

White House National Economic Council Director Larry Summers nods off

Lawrence Summers on Economic Crisis & Conservative Ideology

“…Former Treasury Secretary Lawrence Summers appeared at the Center for American Progress to discuss the current economic crisis facing middle class America and the trickle down economic theory espoused by conservatives. Do tax cuts spur economic growth and pay for themselves with higher revenues on additional economic activity stimulated? This debate will be revived in the coming year as the incoming President and Congress will soon decide whether to renew of a variety of tax cuts adopted starting in 2001 and set to expire in 2010. Economists now have years of experience with this tax policy. What does the evidence show us? What has been the public debate about tax policy and supply-side and has it shifted in light of growing inequality and limited sharing of the benefits of economic growth?..”

The National Debt is over $11.9 Trillion!

US Debt Clock–Real Time!

This bar chart is created using data published in the Monthly Treasury Statement, which is published by the U. S. Treasury Department. Your money is spent through U. S. Senate Appropriations Bills.

The “estimate bar” (in the “Debt Total” box) for the current Fiscal Year (FY), is generated by NDAC analysts from data published by the Congressional Budget Office and several other sources.

“Budget Deficit” vs. “National Debt”—

Suppose you want to spend more money this month than your income. This situation is called a “budget deficit”. So you borrow (ie; use your credit card). The amount you borrowed (and now owe) is called your debt. You have to pay interest on your debt. If next month you don’t have enough money to cover your spending (another deficit), you must borrow some more, and you’ll still have to pay the interest on the loan. If you have a deficit every month, you keep borrowing and your debt grows. Soon the interest payment on your loan is bigger than any other item in your budget. Eventually, all you can do is pay the interest payment, and you don’t have any money left over for anything else. This situation is known as bankruptcy.

Each year since 1969, Congress has spent more money than its income. The Treasury Department has to borrow money to meet Congress’s appropriations.

We pay interest on that huge debt. And now the Treasury is having trouble finding lenders!

All through the year there has been a huge partisan divide on the president’s priorities. Among Democratic voters, health care reform ranks number one with 41% considering it the top priority. Among Republicans and unaffiliated voters, health care reform ranks fourth behind deficit reduction, energy development and education. Fifty-five percent (55%) of Republicans say cutting the deficit in half is the most important goal, a view shared by 43% of those not affiliated with either major party.

Men overwhelmingly see deficit reduction as most important while women are more evenly divided.

Middle-income Americans, those earning $40,000 to $75,000 a year, are most likely to see deficit reduction as the top issue, but a plurality of all income groups share that view. …”

Record-High Deficit May Dash Big Plans

“..At about 10 percent of the overall economy, the gap between federal spending and tax collections is the largest on record since the end of World War II, and bigger in nominal terms than the past four years of deficits combined. Next year is unlikely to be much better, budget analysts say. And Obama’s current policies would drive the budget gap into the trillion-dollar range for much of the next decade.

As they unveiled the final 2009 figure, administration officials argued that expensive emergency programs — such as the $700 billion bank bailout requested by the Bush administration and the $787 billion economic stimulus package Obama signed during his first days in office — were essential to halting a frightening economic slide earlier this year. The deficit ultimately was lower than expected because those programs worked, they said.

But they tacitly acknowledged that the administration has yet to chart a clear path through the fiscal thicket. …”

Larry Summers’ Judgment

David R. Henderson,

A man of many mistakes

“…The date: Jan. 7, 1993, just 13 days before President-elect Clinton is to take office. The place: Little Rock, Ark. The event: a briefing of President-elect Clinton by his top advisers on the economy. Larry Summers, about to be appointed Undersecretary of the Treasury for International Affairs, agrees with what many of Clinton’s advisers say: It is important to reduce the U.S. government budget’s deficit, even in the short run.

What’s striking about this is that the budget deficit at the time was about the same, as a percent of GDP, as it is now. In fiscal year 1993, the deficit was 3.9% of GDP, and for this fiscal year, as noted, it will be at least 3.3% of GDP. Yet, virtually all of Clinton’s advisers, including Summers, wanted to cut the deficit, not increase it. Perhaps the difference is that the unemployment rate was so low then that increasing the deficit would have, in their Keynesian way of looking at things, “overheated the economy.” Well, no, not quite. In fact, the unemployment rate in November 1992, the latest month for which they would have had data, was 7.4%. The most-recent unemployment rate for the current U.S. economy, by contrast, was 6.5%, almost one whole percentage point lower.

Why the difference? The main one, I believe, was political. President-elect Clinton had just won a tight election in a three-way race with then-President Bush and Ross Perot. Perot’s major issue had been the importance of reducing the budget deficit, and he had touched a nerve in the American voting public. Perot had emerged with 19% of the vote, even after having suspended his campaign briefly, and he had even received more votes than Clinton in one state, Utah. Obama, by contrast, had no credible opposition that was talking about the budget deficit. Even if John McCain was a critic of budget deficits, he never presented a credible plan for reducing them. So a reasonable question to ask is this: How much will Larry Summers use his brilliance and how much will he simply twist with the political winds?”

US budget deficit hits record $1.4 trillion

P. PARAMESWARAN

“…The US government closed its 2009 fiscal year with a record 1.417 trillion dollar budget deficit as it poured resources to contain a serious financial crisis that plunged the nation into recession.

The deficit was some 962 billion US dollars higher than the prior year and amounted to 10 percent of US gross domestic product (GDP), the highest since 1945, officials said Friday.

The huge jump in the budget shortfall stemmed from both declining revenues and a massive ramping up of spending in a fiscal stimulus to jolt the world’s largest economy from a prolonged recession following the worst financial crisis in decades.

Receipts for the fiscal year that ended in September totalled 2.105 trillion US dollars while outlays were 3.522 trillion US dollars, the Treasury said.

Officials, however, pointed out that the deficit was 162 billion US dollars lower than the 1.580 trillion US dollars forecast by the administration of President Barack Obama, who inherited the flood of red ink from his predecessor George W. Bush. …”